Continuing consolidation, intensifying competition from larger application providers, rising SaaS deployments, and the lack of game-changing functionality from vendors are factors all forcing companies to improve their current CRM systems through upgrades and enhancements. Enterprises are now looking to squeeze CRM for all they are worth. Businesses will, of course, continue to make investments to improve their customer-facing capabilities, but the need to extract additional value from prior investments will result in moderate growth for the market, according to Forrester Research's "CRM Market Size and Forecast, 2006 to 2010."
Buyers are becoming more cautious, says Bill Band, a principal analyst at Forrester and author of the report. "The past 18 months have been tumultuous for CRM application vendors and their enterprise buyers," he says, pointing to Oracle's purchase of Siebel, SSA Global's purchase of Epiphany, who was then acquired by Infor, and M2M Holdings recent announcement to buy Onyx. "The CRM landscape has changed-there's been significant consolidation within the market."
Forrester estimates that the worldwide market for CRM applications will reach $8.4 billion in 2006, up 7 percent from the previous year. Market growth will be moderate, expanding 7 percent on average per year, reaching $10.9 billion by 2010. But while the market will thrive, it won't be equated to new license revenue. New license sales will reach $2.8 billion in 2010, about 25 percent of total vendor revenues, down from 37 percent in 2003. By contrast, spending on vendor fees of maintenance, subscription offerings, and professional services will increase at a faster and faster pace, and by 2010, will account for 75 percent of total vendor revenues.
Today, the focus is on extracting more value and capability out of previous CRM spending commitments. Driving this is an imperative to improve the customer experience. In a recent survey of senior executives at 176 large firms in North America, Forrester found that 60 percent felt that it was "critical" and 36 percent felt it was "very important" to improve the customer experience. Improving end-user adoption of CRM technologies is another area of high interest, with vendors giving more attention to user interfaces via upgrades that are available in new releases.

Analytics are also receiving more attention as companies seek to understand customer behavior and to make insightful customer-facing decisions utilizing the myriad of customer data they've collected. "Executives feel that analytics are the key to unlocking the value in CRM and are these solutions to leverage investments previously made in transactional CRM applications," Band says. To this end, data integration and management also rated high in importance, as companies look to build a solid foundation on which to "sit" an analytics application.
Renewed vigor from software giants to penetrate the market is also forcing enterprises to rethink their CRM investments. SAP continues to battle Oracle in its quest to become the leader in the CRM space through enhancements in functionality and delivery models and aggressive marketing to the SAP user base, according to Band. Microsoft is making a renewed effort to win a bigger slice of the enterprise applications market through its launch of Microsoft Dynamics CRM 3.0. Additionally, deeper market penetration by SaaS companies like Salesforce.com and RightNow Technologies continues to shift the market. Band notes that both companies have posted impressive sales gains among larger midmarket businesses and even a few enterprises. This has forced existing CRM vendors to develop their own SaaS offerings, as Oracle did through its acquisition of Siebel, and as SAP is doing with the launch of its own CRM SaaS product.
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